New Reform-Minded Board Initiates Strategic Overhaul with $11.6 Billion Allocated for Global Investment
Thailand’s $77-billion Social Security Fund (SSF) is set to invest $11.6 billion in global private assets in a bid to enhance performance and generate better returns, according to an executive from the organization. This initiative aims to address the fund’s struggling performance amid rising demand from an ageing population.
The nation’s largest state fund, which provides essential support for healthcare, unemployment benefits, and pensions to 25 million workers, has recorded an average return of less than 3% over the past decade. The fund is now looking to improve this situation by diversifying its investment strategy away from a narrow domestic focus, as stated by investment board member Petch Vergara.
Ms. Vergara, a former executive at Goldman Sachs with nearly a decade of experience managing private wealth for high-net-worth individuals, noted that the current heavy reliance on domestic and low-risk investments is unsustainable.
“At this rate, the fund could face severe financial challenges by 2051,” she warned. “The fund’s existing investment portfolio is overly concentrated in Thai assets, and while these low-risk investments may appear secure short-term, they hamper potential long-term growth.”
This shift in strategy is prompted by Thailand’s demographic changes, with one-fifth of its 66 million citizens now aged over 60, compared to only 10% two decades ago, according to government statistics.
The population over 60 has grown significantly from 6.2 million in 2004 to 13 million as of December 2023, highlighting an urgent need for reform.
New Board, New Direction
The revamped strategy follows a significant change in the fund’s board, with many members now elected instead of appointed, marking a move toward greater accountability. In December, two-thirds of the 21-member board were elected, reflecting a shift influenced by labor groups and reform-driven political movements.
The new board has launched an investment framework that will begin in 2025, aiming to reduce the fund’s low-risk asset allocation from 70% to 60%, while increasing higher-risk investment exposure from 30% to 40% over the next two and a half years. The goal is to achieve a balanced 50-50 allocation by mid-2027.
Of the higher-risk investments, 15%—approximately 375 billion baht—is earmarked for global private assets, including private equity, private credit, and hedge funds by mid-2027, according to Ms. Vergara.
“The objective is to diversify our portfolio globally to secure higher long-term returns,” she added.
Addressing Underperformance
A recent study by the Thinking Ahead Institute revealed that pension funds with balanced portfolios of 60% global equities and 40% global bonds achieved an average annual return of 7.7% over the past five years. In stark contrast, Thailand’s SSF has recorded an average return of just 2.7% during the same period.
Experts have long called for a strategic shift to meet the increasing demands of a changing demographic. However, trust issues and a history of mismanagement have undermined public confidence in the fund’s effectiveness.
According to an advisor from the Thailand Development Research Institute, currently, 700,000 retired workers are receiving pensions from the fund, and this number is expected to rise dramatically.
Independent research indicates that the fund will soon see more individuals withdrawing than contributing, leading to a projected deficit by 2045. “We are anticipating demographic shifts that will result in more pension recipients living longer,” the advisor noted. “Thus, the balance of inflow and outflow of funds will differ significantly.”
“Achieving high returns is crucial for the fund’s long-term sustainability. Governance reforms ensure the fund’s investments remain viable for the future,” she emphasized.
